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Turning floods into power thanks to flexible finance

Published: 16 January 2017

Spotting the opportunities within our challenging market is a vital strategy for many farmers and agricultural businesses. One Worcestershire farming estate, for example, turned frequent flooding to their advantage by building a hydroelectric scheme that powers a council-run leisure centre.

The family estate of Wyke Manor is owned and run by Charles Hudson, his father Richard and son, Gabriel, and is the base of a successful online business selling petal confetti. Charles grows delphiniums for their petals, rotating with other arable and market garden crops on 380 hectares of land bordering the River Avon.

However, some of this land was frequently flooded. Thoroughly researching the possibilities of turning this challenge into an opportunity, Charles devised a hydroelectric power generation scheme that suited both the environment and the ‘intelligently green’ ambitions of the local authority.

The hydro plant uses two 3.85 metre-wide Archimedean screws to produce a 230-kilowatt electricity supply. A cable under the river takes the power to the local leisure centre, which benefits from a saving on the market price, while Charles benefits from a rate greater than the National Grid wholesale price.

“The added advantage of the scheme is that it also helps manage water levels on the farm, where we had already had to adjust cropping to fit the frequently wet conditions,” says Charles.

Understanding the business

The project, which also includes a conservation island and a combined canoe and fish pass, was originally funded by a £1m loan from AMC and £300,000 from Wychavon Council. However, new flood level data necessitated Charles having to raise the level of the turbine house and extend the screws.

AMC provided the extra £200,000 needed to ensure the plant was resilient and unlikely to fall foul of flooding, and even took over the council’s loan at the end of the first year. By taking advantage of a European Investment Bank grant (which was available at the time), AMC was able to pass on a 0.8 per cent discount on the loan to Charles.

“I’ve worked with a lot of finance companies who are interested only in the finances and accounting of a business like ours,” says Charles, a client of AMC for more than 15 years who has previously benefited from loans for both land purchase and the restoration of properties for letting.

“What’s refreshing about AMC and our regional agricultural manager, Martin Waite, is that they have in-depth knowledge of working with landed country estates. They understand the timescales we work to – timescales that step way beyond lifespans. They also understand the efficiencies we want to achieve.”

Charles cites a previous loan as an example of AMC’s willingness to look at the merits of every application and to consider businesses more holistically than many lenders.

“You can’t apply a single standard to farms, agricultural businesses and landed estates as they all have their own needs, strengths and challenges,” says Martin Waite. “When we make decisions about lending, we’re primarily interested in character, capability and cash flow; the rest of the assessment builds on this solid foundation.

“Charles Hudson couldn’t be a better example of someone with all three. He’s incredibly thorough, exceptional at costing his projects, has a good professional team behind him and chooses the right people to do the work. From a position of strength he has diversified his business and taken on some of the financial risk of the project".

The hydroelectric scheme won an Energy Now award in early 2016, and Charles is already thinking ahead to his next venture and working with AMC to provide the funding.

Advice for ‘energy farmers’

Farmers are increasingly looking at power generation as part of their farming strategies, not just as a source of income, but to give themselves energy security. Here are some pointers for success.

  • Make sure potential schemes fit with your existing enterprises, and with the resources, opportunities and challenges your farm or business already has.
  • Always take local communities and authorities into account. If you can bring benefits for local people in the process, for example using surplus heat from anaerobic digestion to heat public buildings or selling the power at a discount to the local authority, then all the better.
  • Go for a loan with built-in flexibility. Renewable energy schemes often involve buying expensive equipment. Being able to purchase in one go upfront can yield significant discounts, and if your scheme is more profitable than anticipated, it’s good to have the option to pay off the loan early.

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